Thursday, 3 November 2016

Get Control on Your Credit Score

So you notice
that your credit score is dropping lately, and it has got you worried. Well, that's
understandable. After all, your credit score bears a huge significance,
especially when it comes to the financial matters. Fortunately, there is a lot
that you can do to get hold of your credit score, and bring it back to a decent
level.

Here are some
things that you can look into to control your credit or CIBIL score:

Credit Utilization

Credit
utilization is often the hidden culprit behind your reducing credit score. Since the impact of credit utilization is not
directly visible, it can often become too late before you realize the problem. The
way you spend credit can affect your score in many ways. Mainly, credit
utilization can be detrimental to your score in two different ways:

1) Credit Cards: Suppose
your credit card has a limit of Rs. 2,00,000, and if you spend more than Rs.
60,000 every month then it means you are spending twice more than the safe
limit (the limit being 30% of the total credit limit). Using credit more than the safe limit can
greatly damage your score, and thus, you should always use your credit wisely
and in a controlled manner.

If you have
multiple credit cards then the safe limit would be applicable on the combined
limit. In other words, if you have two credit cards with Rs. 1 lakh limit on
each, then you should spend less than Rs. 60,000 in a month (30% of Rs. 2
lakh).

2) High Credit Dependency:
If you have a habit of using credit card for majority of purchases, and taking
loans frequently, then you may be damaging your credit score in the process without
even your knowing it. Individuals who consume too much credit can be considered
"risky" by financial institutions. This is why you should only use
credit cards when cash is not available. The same goes for loans. Even if you
need money on an urgent basis then it is advisable that you get it from family
or friends.

Payments

Do you often
struggle to pay your credit card bills on time? Or do you often pay loan EMIs after
the due dates have gone by? Delayed
payments are one of the most common reasons behind dwindling credit points, and
can also mark you name on CIBIL defaulters list. If you want to improve
credit score then it is a must that you become punctual with your loan and
credit card payments. If you have a considerable debt which is causing the
delay then you can opt for any of these options:

1) Debt Consolidation

If you have
multiple loans then you can request your bank for debt consolidation. What it
does is that it combines all your loans in one single loan, thus making debt
payment simpler and manageable. Instead of keeping track of multiple loans you
have to now just take care of one big loan. Another advantage of debt
consolidation is that you can also get lower interest rate this way.

2) Personal Loan

Another good way
to take care of high debt is to take a personal loan to pay the other loans.
This is because a personal loan generally has a low interest rate in comparison
to other loans, or credit cards. While you do have to pay back the personal
loan this way, at least the interest rate is lower, and hence the total debt
would be lower.

Credit ReportDiscrepancies

A lot of times
discrepancies/errors in credit reports are the reason behind low credit scores.
This is why credit experts always recommend that you check your report and go
through it in a detailed manner every few months. This will help you catch any
mistakes, if it has some. By bringing the same to your bank you can have them
corrected and get a boost in your credit score.

Your credit
score is important. Whether you need a SBI
home loan, higher education loan,
or even a credit card, your score will be instrumental in the process. By
keeping your credit score in control you can save yourself from undesired hardship,
and wastage of time.